Rutgers to pay $11.5 million to exit American Athletic Conference

In order to withdrawal from the American Athletic Conference earlier than its contractual obligation and enter the Big Ten for next season, Rutgers University on Wednesday agreed to pay the former Big East Conference $11.5 million.

The settlement ends nearly 15 months of acrimonious negotiations between Rutgers and the league of which it’s been a member since 1991. In a statement, school President Robert Barchi said the negotiated settlement is $3.5 million less than the $15 million exit-fee the conference had originally sought and the university projects that over the next 12 years the increase in revenue from moving to the Big Ten will approach $200 million.

Rutgers has already paid the AAC $5 million, including $2.5 million in league fees that were withheld last summer and an initial $2.5 million payment to the Big East upon submitting its formal withdrawal notice on Nov. 20, 2012. The remaining $6.5 million will be paid over four years beginning Sept. 1, according to a school spokesperson, and Rutgers is also expected to now receive its $1.5 million Pinstripe Bowl payout that was initially withheld by the conference last December.

“This settlement will allow us to continue along the path to self-sufficiency for our athletic programs,’’ Barchi said. “One-time restructuring costs like this settlement and the costs associated with canceling a previous marketing contract are more than offset by anticipated revenues from the Big Ten and from our new marketing partner IMG College. The increased ongoing revenue resulting from these one-time investments will provide the financial support necessary for the athletic department to move toward financial stability.’’

In a joint statement, Rutgers and the American Athletic Conference announced that the agreement settles the litigation between the two parties and calls for the Scarlet Knights’ membership to be terminated July 1.

“I am pleased to announce this agreement and I want to thank Athletics Director Julie Hermann for her leadership and efforts in completing it,’’ American Athletic Conference Commissioner Mike Aresco said. “We wish Rutgers University well and appreciate the contributions the University has made to our conference over the years. Having enjoyed an extremely successful inaugural football season and being in the midst of an equally successful basketball campaign, it is clear that we have forged a strong Conference. We look forward to welcoming East Carolina University, Tulane University and the University of Tulsa in 2014 and the United States Naval Academy in 2015.’’

Said Hermann: “It’s been a privilege to be a member of the American Athletic Conference and to be associated with the great professionals at the league office that make The American a conference of tough competition, class and integrity. I deeply appreciate the leadership and insight Commissioner Aresco provided us as we worked together for an outcome that allowed Rutgers and the American Athletic Conference to enter this new era in their history effectively. The American has been a wonderful home for our student-athletes and we wish them well in their future endeavors.’’

As part of the league’s bylaws, Rutgers was contractually obligated to provide 27 months notice and pay $10 million once it provided its formal notice of withdrawal on Nov. 20, 2012. The school initially paid $2.5 million and then filed a lawsuit at Middlesex County Superior Court within minutes of signing an agreement to join the Big Ten.

Rutgers claimed it should not be obligated to pay the $10 million since other schools agreed to lesser amounts in escaping the league in recent years. The conference appeared willing to forgive the required 27-month exit clause – which tied Rutgers to the league through the 2014-15 season – but was intent on recovering the withdrawal fee that doubled from $5 million in October 2011 after Navy agreed to join for the 2015 football season.

In the suit, Rutgers claimed the league’s withdrawal fee “arbitrarily applies to some, but not all, of the Big East (American) football schools, and the effect is to penalize certain members if they seek to withdraw.’’

West Virginia was obligated to pay $5 million but reportedly paid $21 million to join the Big 12 two years early in 2012, while Pittsburgh and Syracuse each paid $7.5 million to enter the Atlantic Coast Conference one year early in 2013. TCU, which signed paperwork to join the Big East but left before competing in the league, paid $5 million to instead join the Big 12.

While Louisville was required to pay $10 million, the university reportedly agreed to pay $11 million to the AAC in November in order to enter the ACC for next season. Louisville’s agreement reportedly specified that if Rutgers was allowed to leave the league before July 1, 2015, and paid an exit fee less than $11 million, then Louisville would get a refund for that difference. That stipulation now becomes null and void.

While Rutgers’ athletics teams will remain in the American Athletic Conference for the remainder of the winter and spring seasons, the settlement essentially ends a 23-year marriage with the league that relinquished the Big East name last year but inherited the Rhode Island-based conference’s legal structure.

The Scarlet Knights, who joined for highly-competitive football league in ’91 and for all sports in 1995-96, won a handful of regular-season and tournament titles in the Big East, which today is comprised of 10 private universities that compete in most of the top-level collegiate sports except football.

While it’s been debated what kind of impact the Scarlet Knights’ membership into the Midwest-based Big Ten will have on their student-athletes travel-wise, the move to the tradition-rich league is expected to enhance the university’s financial future, with the conference reportedly set to distribute $25.7 million to most of its member schools this year.

The Big East, in contrast, reportedly paid each of its member schools $8.2 million last season and the American Athletic Conference is expected to distribute less than $2 million in media rights fees to Rutgers and its league brethren this year.

Although Rutgers won’t receive a full share of the Big Ten revenue for six years after it officially enters league play, Barchi said the marketing partnership with IMG College is expected to greatly increase university revenue.

Three months after escaping a 13-year marketing relationship that generated approximately $30 million for the university, Rutgers entered into an initial 11-year, $65 million partnering agreement with IMG. Top officials said the agreement includes an option to extend the partnership for an additional three years and generate a projected $87 million and will more than double the revenues to the university as well as capitalize on enhanced opportunities for national corporate support.

“These are essential investments that are a part of our program to enable Rutgers athletics to operate from a position of financial self-sufficiency,” Barchi said. “Driving down the structural subsidy is a focus of the university administration and our boards. The one-time costs that we are incurring during this transition period will provide us with the ability to generate the stable, predictable and growing revenues that will minimize the subsidy going forward.’’

About Keith Sargeant

Keith Sargeant is a graduate of Middlesex County College and Kean University. A Home News Tribune staff writer since August 1997, Keith has been covering Rutgers sports since 2000, serving as the Scarlet Knights' football beat writer since 2006.

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About the Author

Jerry CarinoJerry Carino has covered sports for the Gannett New Jersey newspapers since 1996 and has been on the college basketball beat since 2003. A native of Old Bridge, he also teaches journalism at Kean University.E-mail Jerry

Josh NewmanJosh Newman has worked for the Press since September 2004 and began covering Shore Conference sports full time in September 2006. He is a 2004 graduate of Springfield College with a degree in communications/sports journalism.E-mail Josh

Ryan DunleavyRyan Dunleavy has covered Rutgers athletics for more than a decade, dating back to his days as a student at his alma mater. He became New Jersey Press Media’s Rutgers women’s basketball beat writer in 2009 and Rutgers football beat writer in 2013. Since joining the staff in 2004, the Morris County native also has covered the NFL, MLB, NBA, the Somerset Patriots and high school sports.E-mail Ryan